Implications: The homebuyer tax credit artificially boosted home sales in the Spring and then – after taking sales away from the future – the lapse of the credit caused a "hangover" in the Summer. Now sales are rebounding without artificial government support. Sales are up two months in a row and came in well above consensus expectations in September, despite some difficulties in the foreclosure process. Although the data will zig and zag from month to month, we expect the rebound trend to continue until sales get back up to about 5.5 million units at an annualized rate. It is important to note that we expect the rebound to continue even if mortgage rates float back upward. As buyers get more confident about the state of the economy, the jobless rate trends lower, and buyers become more confident that their homes will rise in value rather than fall, they will be more willing to buy homes even if rates are higher. For example, mortgage rates averaged about 7.5% in the late 1990s and were not an impediment to rising home sales. Meanwhile, the months' supply of homes for sale has now fallen for two straight months as sales have picked up. We look for that trend to continue as well.
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